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Heterodox Approaches to Economics
Colorado State University, 2021
This course will survey contemporary heterodox approaches to economic research, both from a microeconomic and a macroeconomic perspective. Topics will be treated from a general, critical, and mathematical standpoint. The adjective ‘heterodox’ must be understood broadly. Some of the ideas and models developedin the course will not be ‘heterodox’ from a methodological point of view, even though their implications fall outside those of ‘mainstream’ economics. One of the main themes of the course will be to understand how ideas from political economy can be formalized into mathematical models and how these ideas apply to current economic issues. The goal of developing models is to be able to draw policy implications that can be used to inform policy making. Emphasis will be put on developing analytical and modeling skills that will enable the interested student to contribute originally to these research fields, both theoretically and empirically. The course is divided in two parts, and each part will roughly take 8 weeks.
- The first part of the course will focus on contemporary microeconomic interpretations of ideas rooted in Classical Political Economy (Smith, Ricardo, Malthus, Marx...). Topics will include: self- and other-regarding preferences, coordination failures, evolutionary game theory, capitalist institutions, information problems and power in labor and credit markets, and general equilibrium implications.
- The second part of the course will be centered around developing intuition and modeling techniquesin order to study the linkages between economic growth and income distribution, both in developingand advanced economies. One focus of this part of the course will be onclass, defined in relation tothe ownership (or the lack thereof) of capital assets, and its implications for growth and distributionpatterns. Topics will include: Classical theories of the long-run tendencies of capital accumulation,technological change, growth and distribution; medium-run fluctuations and distributional conflict;Keynesian and Post-Keynesian theories of investment, income distribution, and growth; secular stag-nation and the distribution of wealth
The course will be somewhat heavy on the math, but we will try to put equal weight on the quantitative partas well as on the interpretation of mathematical results
At the end of the course, successful students should be able to:
- Apply basic concepts of classical and evolutionary game theory to understand institutional design,coordination problems, public goods, externalities.
- Develop tools in asymmetric information modeling in order to understand principal–agent problemswith applications to labor markets and credit markets.
- Develop a working knowledge of models incorporating growth and distribution dynamics, alternativemodel ‘closures’ and policy implications.
- Develop a graduate understanding of: technical change, the distribution of wealth, and the role ofaggregate demand in economic growth and income distribution.
- Bowles, Samuel 2006 (B). Microeconomics, Princeton. ISBN-13: 978-0691126388
- Foley, D. K., Michl, T. R., Tavani, D. 2019 (FMT). Growth and Distribution, Second Edition, Harvard.ISBN-13: 978-0674986428
The following list of topics is tentative, because many of the following topics will easily cover more thana week. Topics may be added or dropped according to the actual progress made in class. Variations in thecovered topics will be communicated in class and through Canvas.
Part I: Micro (Weeks 1 - 8)
- Social interactions and institutional design (B1).
- Spontaneous order. an introduction to evolutionary game theory (B2).
- Preferences and behavior (B3).
- Strategic complementarities and coordination failures (B4).
- Bargaining and rent seeking (B5).
- Employment, unemployment, and wages (B8).
- Credit markets, wealth constraints, and allocative inefficiency (B9).
- The institutions of a capitalist economy (B10).
Part II: Macro/Growth and Distribution (Weeks 9 - 15)
- Growth and distribution. One sector models: consumption and growth, wages and profits. In-come shares. Choice of technique and production functionsN-sector models of growth anddistribution. Equalization of profit rates. Issues with capital theory (FMT1-3, additional lecturenotes).
- Model closures: the labor market. Classifying Technical Change. Biased Technical Change andcompeting views of income distribution. Applications using the Extended Penn World Tables(3.0) (FMT4, 8).
- Savings and capital accumulation. Arbitrage equations and inter-temporal optimization (FMT5, notes on Canvas).
- Classical models of growth and distribution: distributive closure vs. labor-constrained closure(FMT6).
- Goodwin’s (1967) growth and distribution model, and contemporary developments (additionallecture notes).
- Workers’ savings and the Pasinetti theorem (FMT17).
- Technical progress and the functional distribution of income. Neoclassical (technology) andclassical (class-conflict) perspectives. (FMT7, various papers).
- Capacity utilization, aggregate demand, and the business cycle: basic elements of post-Keynesianmacroeconomics (FMT12, various papers)